Poll: Many Execs Say Their Investment Management Firms Lack System to Monitor for ‘Suspicious Transactions’
Jul 28th, 2008 • Posted in: Research ReportOne key step to stopping fraud, says Deloitte, is establishing a strong ethical corporate culture
From Deloitte:
“As anti-fraud enforcement levels have surged to an all-time high in the investment management industry, a recent online poll, conducted by Deloitte, found that nearly one-quarter (23.8 percent) of respondents’ companies do not have a ’suspicious transaction’ monitoring system and an additional 32.4 percent of respondents were not aware of whether their firms did.
“‘Because hedge funds, private equity firms and other investment managers are often incorporated offshore and serve a client base of high net worth individuals from around the world, these organizations can be potential targets for suspicious transactions that may be part of money laundering, Foreign Corrupt Practices Act violations and other fraud schemes,’ said Michael Shepard, a principal in the Anti-Money Laundering practice of Deloitte Financial Advisory Services LLP (Deloitte FAS)….
“While 39.2 percent of respondents’ surveyed said that their companies maintain formal anti-money laundering policies and procedures, one in 10 (10.1 percent) respondents’ surveyed said that their companies have not addressed money laundering at all. An additional 31.7 percent of respondents surveyed do not know whether their firm has established formal anti-money laundering policies and procedures.
“Investment management firms must also be wary of potential FCPA violations. The FCPA states that it is a federal criminal offense for any company or individual doing business in the U.S. to offer, pay or authorize a bribe to a foreign government official to gain business advantage. While the FCPA was passed in 1977, enforcement has increased dramatically in recent years. Yet, despite the increase in the number of enforcement actions, 13.6 percent of respondents surveyed indicated that their companies have not addressed FCPA risk at all; 12.1 percent said that their organizations had addressed FCPA risk, but have not established a program to address the risk; and 10.9 percent said that their organizations have an established FCPA program, but that it needs improvement….
“According to Deloitte, some of the key steps that can help mitigate fraud, money laundering and FCPA violations include:
- “Establish a consistent organizational culture that does not condone fraudulent activity….
- “Institute an anti-money laundering compliance program. Such a program should be designed to address several areas including: assessing risk, establishing proper governance and reporting structures, designating an anti-money laundering compliance officer and conducting an enterprise-wide training program….
“More than 500 executives from the banking and security, financial services and investment management industries responded to the polling questions….”
For the full press release from Deloitte, July 23, click here.
Editor’s Note: Deloitte is a corporate sponsor of Ethics Newsline®.
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